FUNDAMENTAL OVERVIEW The strong bullish momentum in the S&P 500 has waned recently as the prolonged US-Iran stalemate brought the attention back to underlying risks.
FUNDAMENTAL OVERVIEW The strong bullish momentum in the S&P 500 has waned recently as the prolonged US-Iran stalemate brought the attention back to underlying risks. The constant push for a diplomatic resolution instead of another full-fledged war has been supporting the risk sentiment on expectations that a deal would be reached eventually.
Nonetheless, the stalemate is causing oil prices to rise, and we are now back around triple digit levels. That looks unlikely to change anytime soon as Trump has rejected Iran’s proposal to first open the Strait of Hormuz and then hold nuclear talks. Unfortunately, with stock prices at all-time highs Trump might not feel any pressure to concede.
Therefore, we might get stuck in a longer consolidation phase until the next major catalyst. This might even set the stage for the next big selloff if the Strait of Hormuz remains closed for much longer and oil prices stay elevated, thus forcing the Fed to hike interest rates in the coming months. Today, we have the FOMC policy decision and although the Fed is expected to keep everything unchanged amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to resilient US data and a longer than expected US-Iran war.